Seller's Discretionary Earnings

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The standard profit metric used to value small, owner-operated businesses — including junk removal companies.

Operator contextUpdated Feb 2026

Use the guidance with your local numbers.

Resource pages explain the planning model, but local disposal rates, labor costs, truck setup, service area, and customer demand still decide the final operating choice.

● 25 words · AEO target 40–56Read the full answer

Definition

Seller's Discretionary Earnings

SDE is the total financial benefit a single owner-operator extracts from a business in one year, including salary, perks, and non-cash expenses.

Formula or example

SDE = Net Income + Owner's Salary + Owner's Benefits + Interest + Depreciation + Amortization + One-Time / Discretionary Expenses In Practice: Junk Removal Business SDE

SDE = Net Income + Owner's Salary + Owner's Benefits + Interest + Depreciation + Amortization + One-Time / Discretionary Expenses

Breakdown

What it means

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The total cash benefit flowing to a single full-time owner-operator before taxes, interest, depreciation, and discretionary spending Includes the owner's salary, benefits, and any personal expenses run through the business Normalizes one-time costs (equipment purchases, legal fees, buildout) that won't recur under new ownership Represents the true earning power of the business if you're the one running it day-to-day

Used for

Pricing an acquisition — buyers apply a multiple (typically 2–4×) to SDE to determine purchase price Comparing businesses of different sizes — SDE normalizes owner compensation differences Estimating what an owner-operator will actually take home from the business

Excludes

Revenue from non-recurring windfalls (insurance payouts, PPP loans, asset sales) Income that requires hiring a replacement for the owner (that's where EBITDA is used instead) Capital expenditure needed to sustain operations — CapEx is separate from SDE

Why it matters

Operator impact

SDE is the single most important number in any small business acquisition. If you can't calculate it accurately, you can't price a deal.

If you're buying or selling a junk removal business, SDE is the number both sides negotiate from

If you're buying or selling a junk removal business, SDE is the number both sides negotiate from — not revenue, not net income

Why it matters

A 2-truck operation doing $500K revenue with $180K SDE is worth roughly $360K–$720K (at 2–4× multiple)

A 2-truck operation doing $500K revenue with $180K SDE is worth roughly $360K–$720K (at 2–4× multiple) — that's the range you'll see in most deals

Why it matters

Knowing your SDE lets you benchmark against industry data: the median junk removal SDE margin is 25–35% of revenue

Why it matters

Mistakes

Common mistakes

Six modules, one focused interface. No add-ons, no upgrade prompts, no per-feature pricing — just the tools that run your business.

Double-counting add-backs

Double-counting add-backs — adding back depreciation AND the full cost of a truck purchase in the same year

Mistakes

Claiming expenses are 'one-time' when they recur annually (truck replacements, insurance premium spikes)

Mistakes

Using an unrealistic owner replacement cost

Using an unrealistic owner replacement cost — if you pay yourself $40K but the market rate is $80K, SDE is overstated

Mistakes

Ignoring capital expenditure needs

Ignoring capital expenditure needs — SDE looks great until the buyer realizes they need $60K in truck replacements year one

Mistakes

Adding back expenses that directly drive revenue (marketing, key employee bonuses)

Adding back expenses that directly drive revenue (marketing, key employee bonuses) — removing these would hurt the business

Mistakes

Mixing up SDE and EBITDA

Mixing up SDE and EBITDA — SDE includes owner compensation, EBITDA does not. Using the wrong one changes the valuation by 30–50%

Mistakes

Related resources

Next pages that support this topic.

Junk Removal Business Valuation Guide

Tool

Profit Margin Calculator

Feature

Reports & Analytics

FAQ

Questions this resource should answer.

Honest answers. If your question isn't here, ask us directly.

SDE includes the owner's salary and benefits as an add-back; EBITDA does not. SDE is used for small, owner-operated businesses where the buyer will replace the owner. EBITDA is used for larger businesses with professional management in place. For most junk removal companies under $5M revenue, SDE is the correct metric.

For junk removal businesses, typical SDE multiples range from 2× to 4×. A 2× multiple is common for single-truck operations with limited recurring revenue. A 3–4× multiple applies to multi-truck businesses with recurring commercial accounts, strong systems, and documented processes.

SDE only adds back one owner's compensation. If the business has multiple owners, you'd add back only the primary operator's comp and use EBITDA for the rest. Alternatively, calculate the cost of replacing each owner with a hired employee and adjust accordingly.

Industry benchmarks suggest median SDE margins of 25–35% of revenue for junk removal businesses. For specific comparables, check BizBuySell, BizQuest, and industry-specific transaction databases. ScaleYourJunk's data reports also publish anonymized benchmarks.

Still have questions?

Next step

Want to value a junk removal business the right way?

Our valuation guide walks you through SDE calculation, comparable multiples, and deal structure — built for junk removal operators.

Define the termUse it in pricing and operationsLink back to the right software workflow

Seller's Discretionary Earnings

Use the guidance with your local numbers.

Seller's Discretionary Earnings

Formula or example

What it means

Means

Used for

Excludes

Operator impact

If you're buying or selling a junk removal business, SDE is the number both sides negotiate from

A 2-truck operation doing $500K revenue with $180K SDE is worth roughly $360K–$720K (at 2–4× multiple)

Knowing your SDE lets you benchmark against industry data: the median junk removal SDE margin is 25–35% of revenue

Common mistakes

Double-counting add-backs

Claiming expenses are 'one-time' when they recur annually (truck replacements, insurance premium spikes)

Using an unrealistic owner replacement cost

Ignoring capital expenditure needs

Adding back expenses that directly drive revenue (marketing, key employee bonuses)

Mixing up SDE and EBITDA

Next pages that support this topic.

Junk Removal Business Valuation Guide

Profit Margin Calculator

Reports & Analytics

Questions this resource should answer.

Want to value a junk removal business the right way?